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Today and article appeared in the US newspaper The New York Times stating that Steve Balmer, the current Microsoft CEO, is stepping down soon.

The article includes examples of the many ways in which Steve managed to screw-up in Microsoft by missing what everybody and my cat already new:

  • Mobile devices are and will continue to be hot
  • Internet search is critical

Microsoft’s rivals (Apple and Google) have taken an - arguable - lead in these areas leaving the giant company in the digital dust.

There is a lesson here - actually several - which are worth mentioning.

An important one is that the rich and powerful - the would be masters of the universe - tend to screw-up more than the average Wei and Katrien. The bigger an organization, the more it tends to make larger mistakes. It is very true that the bigger they are, the harder they fall. This is precisely one of the problems the Absolute Austro-Libertarian system tries to prevent by avoiding governments because they are the largest sources of screw-ups.

Think of the problem this way. If a government makes a large mistake, all its citizens pay the price. They were all thrown under the government’s control without any choice and none of them have a way out. They are trapped.

However, what happens if a giant company like Microsoft makes a giant mistake? Not much. Only their shareholders will be affected. Shareholders, allow us to remind you, who bought shares voluntarily and can sell them any time they like. 

See the difference?

No choice at all versus all the choices.

There is another lesson here. Microsoft did not pursue profitable tendencies which were exploited by other companies: Google and Apple. Most people would say that Google and Apple are Microsoft’s competitors and such actions should be expected. Not so. Google came to the Internet search arena many years before Microsoft did. Google search is much older than Bing search. Apple dominated the mobile market with new devices (Ipods, Ipads, phones) much earlier than Microsoft tried to do so. Sure, Microsoft has competing products with Google and Apple, but they are not strictly competitors because their market shares are so much larger.

Think of it in this way. If you are selling lemonade on the corner of your house, are you really competing with Coca Cola? Of course not. From a market perspective you are too small and therefore you are unable to impact Coca Cola’s retail prices. In essence, competition-wise you don’t exist.

So, what we have here are two companies that are not Microsoft’s competitors taking the lead in products and services that are affecting Microsoft profit-wise. This happens because of Microsoft's lost business opportunities (they don’t have new products to sell) when at the same time some of its older products are becoming less profitable.

This sounds unusual but it is quite common in business. As Absolute Austro-Libertarian enthusiasts, we keep hearing governments talking about the benefits of competition and how it needs to be fostered. When in reality, competition has been exaggerated out of all proportion. Yes, competition is desirable,  but what is more desirable is to have an active market because it not only brings new products to us, but it increases our standards of living.

An active market can only be achieved through a free market; and we mean a truly free market. Let us present a scenario to you; what would you prefer:

  1. Microsoft and Apple competing for standard, old-style cellular phones versus
  2. Apple releasing the iPhone

Or

  1. Having to use Microsoft Network to search the internet versus
  2. Having access to Google's Search engine

We believe the choices are obvious.

This is precisely why a free-market trumps competition. Revolutionary innovation trumps price competition every time. Better products (even if somewhat more expensive) are always preferred to older ones (even if cheaper). After that, competition takes care of lowering prices and we have the best of both worlds.

Governments, on the other hand, have a “competition fetish”. They do not understand the free market and don’t care to understand it because they can’t control it. Competition, on the other hand, they can control; or more precisely, they can mismanage through subsidies and artificial monopolies. But it sounds so good in political speeches!

So the conclusion of this story is that the Absolute Austro-Libertarian system despises all kinds of governments because they lower our standards of living through stupidity. We grant that larger corporations are not perfect, but the damage they can inflict on all of us is so small when compared to governments, that the Absolute Austro-Libertarian system is by far the smartest choice!

Note: please see the Glossary if you are unfamiliar with certain words.

 

 

 

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